The horrific events of September 11 have touched all of our lives. The consequences have affected us emotionally, spiritually, and economically. Our heartfelt condolences to all who lost loved ones in the terrorist attack.
Unfortunately, the terrorism doesn't stop there. The airlines wasted no time in lobbying the federal government for bailout money, as in, taxpayer's money. It's bad enough to be taken to the cleaners on airfares, but insult is added to injury with the government's quick rollover.
Not only did airlines whine for taxpayers money, to the tune of $5 billion dollars; but the weekend after the attack several airlines starting twisting Congressional arms to insulate them from any liability for the attack. I find this curious because liability had not yet even been established.
Lest I be misunderstood, I do not oppose government assistance to the airline industry. I do, however, oppose the early Christmas gift of $5 billion dollars and $10 billion in loan guarantees. What conditions were imposed on the $5 billion gift? Not much, except airlines are to hold their hands and wallets out.
As I said, I believe relief for the airline industry is warranted. But so is help for other segments of our travel and tourism community. If we help the airlines, what about hotels, car rental companies, skycaps, taxi drivers, travel agents, and so on. Everyone connected with travel has been affected. Why do airlines get special treatment?
What should have been done? If I were in charge (and heaven help us if I were!), I would have taken airline stock options and warrants so that when the airlines returned to profitability, the government could have returned the $5 billion to the tax payers by selling the stock.
And what is this $10 billion in loan guarantees? Guess who is the guarantor? You! That's right, the American taxpayer. What would I have done? Offered loans with 70% guarantees. This would have required the airlines to find other lending partners willing to accept some risk. What is the incentive to protect taxpayer dollars? There is none. Under my plan, if an airline wanted, say, a $500 million taxpayer "loan," the government would provide 70% of it and the airline would have to convince private or institutional lenders that they are a good credit risk for the remaining 30%.
And one more thing while I'm on my soapbox. Other than a couple of token officers, I'm not seeing airline executives, pilots, and other groups taking big pay cuts. Some of these people make over $500,000 a year! Why does the taxpayer have to sacrifice when top employees, by and large, are not.
The fact of the matter is that some of the airlines are so mismanaged that no amount of taxpayer bailout money will save them. The cost-cutting measures of airlines are necessary, but it will not be enough to save some carriers.
Southwest Airlines is an exception. They are well-managed and making money throughout all this. They laid off no employees and are flying their routes.
What will likely happen? We will probably see two or more major carriers file for bankruptcy protection. That doesn't mean they will cease operations. There will be enormous pressure on airlines to raise fares, especially unrestricted fares. But as long as sales are slumping, there will be market pressures to lower fares, fill planes up, cut loses and forget making any money.
Stay tuned. And, one last question, do you think the airlines will return your money in the form of good service and lower fares? Don't hold your breath.
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